BRICS countries led by Russia and China appear to be mounting a direct challenge to US dollar dominance by rapidly accumulating gold reserves and building an independent trading infrastructure, transforming the so-called "archaic" metal into the cornerstone of a new multipolar financial system led by Moscow and Beijing.

The subtle but increasingly noticeable shift comes despite predictions following the collapse of the Bretton Woods system in 1976 that gold would be relegated to history, replaced by fiat and digital assets or energy currencies. Instead, according to the Russians, Chinese and Iranians, physical gold is strengthening its position as the foundation of financial sovereignty and the primary protective asset of the 21st century.

The shift to a potential gold-backed BRICS currency unit may be coming just in time for Tehran, whose currency continues to collapse into dust as of December 14. So far, the Russians have not yet yielded to Iranian demands to move to a new unified currency, leaving them in their current predicament.

China and Russia are leading the accumulation drive, with Beijing producing 380 tonnes of gold in 2024 whilst officially purchasing 180 tonnes. However, analysts estimate actual purchases through various channels could be two to three times higher. Russia produced 340 tonnes whilst its central bank systematically added to reserves, diversifying away from dollar assets.

Combined production from BRICS and aligned nations, including China, Russia, Brazil, South Africa, Kazakhstan, Iran and Uzbekistan, accounts for approximately 50% of global output, giving them unprecedented influence over the physical market.

Their share of central bank gold purchases exceeded 50% between 2020 and 2024, shifting the centre of power from traditional Western vaults towards Asia and Eurasia. Interest in gold as a protective asset today is directly linked to investors' and states' apprehensive attitude towards the US dollar and the reliability of American financial infrastructure.

Germany's prolonged inability to fully repatriate gold stored in Federal Reserve Bank of New York and Bank of England vaults as undermining confidence, is one example of the West not taking the emergence of gold as a potential threat overall. Whilst G7 nations excluding Canada hold more than 60% of reserves in gold, BRICS countries are rapidly increasing their gold holdings even as Western powers show no concerted interest in stepping up their stores.

A historic case in point is former British Prime Minister Gordon Brown, who authorised the sale of about 395 tonnes of the UK’s gold reserves between 1999 and 2002, roughly half of Britain’s bullion holdings at the time. Commentators and some politicians argue he sold near the bottom of the gold market, pre‑announced the auctions in a way that depressed prices further, and thereby cost the UK many billions in potential gains as gold surged in subsequent years.

Selling the same 395 tonnes of gold today would raise on the order of $53bn, compared with about $3.5bn from the original 1999–2002 auctions, a difference of roughly $49–50bn in nominal terms.

The UK wasn't alone in its sell-off at the time; several other Western countries also followed suit. In 1999, 14 other European eurozone countries, UK, Sweden and Switzerland signed the Washington Agreement on Gold to cap total official sales at 2,000 tonnes over five years and avoid destabilising the market.

Gold has doubled its purchasing power over the past 25 years relative to real goods, with a car that once cost 200 gold coins now costing approximately 100, whilst the dollar has lost value. This contrasts with oil and wheat, which show volatility but no dramatic long-term price growth.

According to Russian sources, the BRICS strategy includes creating an independent pricing platform with settlements in national currencies and launching a "BRICS Gold Price" benchmark in direct challenge to dollar hegemony.

The bloc is forming a joint gold pool for market stabilisation, developing shared infrastructure across Russia, China, UAE and South Africa with unified standards, and using gold as collateral in interstate clearing operations to reduce currency risks.

"For BRICS countries, gold is a tool for protection against sanctions risks, a response to the unreliability of traditional partners, and a real asset with a thousand-year history of recognition," economics expert Yevgeny Biryukov said to Russian media on December 13.

As IntelliNews previously reported, the BRICS group has launched a working prototype of a gold-backed trade currency known as the “Unit”, as the world’s leading emerging markets search for a way to ditch the dollar, the Institute for Economic Strategies of the Russian Academy of Sciences (IRIAS) reported on December 4.

The Unit is a digital trade instrument backed by a reserve basket composed of 40% physical gold and 60% BRICS national currencies, equally weighted between the Brazilian real, Chinese yuan, Indian rupee, Russian ruble, and South African rand. The pilot was initiated IRIAS which issued 100 Units on October 31, each initially pegged to 1 gram of gold.

As bne IntelliNews recently reported in a deep dive into dedollarisation, the Global South have been long been unhappy with the dominance of the dollar in global trade, which gives the US a powerful geopolitical lever, but central bankers around the world were freaked out by the imposition of the SWIFT sanctions on Russia only days after Russia’s invasion of Ukraine in February that threatens every country in the world’s ability to trade freely.

Since then, they have been hunting for an alternative. Many countries have since switched to settling their mutual trade in national currencies. Russia and China now settle nearly all their trade in yuan and rubles. India and China have also switched to national currencies.

And almost all trade in the Eurasian Economic Union (EEU) is now done using each member’s own currency. However, while China and Russia's mutual trade balance is relatively balanced, making using national currencies easy, India runs a $60bn trade deficit with Russia, thanks to the oil trade, making the relationship more difficult.

Courtesy : Intellinews